25 April 2012

Moral Markets

Dug from the files, and in response to a tweet...

Future World Leaders and Opinion Formers...

Some years ago, for reasons both convoluted and improbable,
I attended a conference along with – among others – Lech Walesa and Mikhail
Gorbachev. The two giants of the late Cold War debated the brutality of the
Soviet system and the sometimes deeply exploitative nature of our own. As they
drew to a close, Mr Walesa gestured dramatically across the stage, and said
perhaps communism could have been a good system after all, if only it had
always been run by people like Mr Gorbachev.

Afterwards my room-mate, a rising star in a leading American
accountancy firm, flatly dismissed this. “He’s wrong,” he said, “it didn’t
matter who was in charge; the markets wouldn’t have worked.”

Although I thought my room-mate was probably right, I’d felt
some of Mr Gorbachev’s criticisms weren’t far off the mark; should wealthy
countries really be able to bolster their own positions by hiring the best and
brightest from poorer countries for salaries unimaginable at home? Didn’t that
deprive developing countries of the very people they most needed to build their
own economies, thus undermining real competition and perpetuating global
inequality?

And, of course, as we all learned so painfully in 2007, any
cockiness we had about the efficiency of our own system was completely unfounded;
our markets, it turned out, didn’t work either. Our house was built on sand.

Catholic Social Teaching

In 2009 Benedict XVI issued his third encyclical, Caritas in Veritate, building on more
than a century of Catholic social teaching to place the Church at the service
of the world in terms of love and truth. Offering a Catholic vision of economics,
politics, and society, Benedict rejected the idea that left to its own devices,
an unfettered market would serve humanity at large:

“Economic activity cannot solve
all social problems through the simple application of commercial logic. This
needs to be directed towards the pursuit of the common good, for which the
political community in particular must also take responsibility. Therefore, it
must be borne in mind that grave imbalances are produced when economic action,
conceived merely as an engine for wealth creation, is detached from political
action, conceived as a means for pursuing justice through redistribution.”

It would be too easy to dismiss this as utopian idealism.
Catholic social teaching, aside from being deeply rooted in Sacred Tradition,
overlaps remarkably with the observations and theories of such luminaries as
Amartya Sen and Joseph Stiglitz, Nobel Prizewinners who have long criticised traditional
economic theories as lacking on both ethical and methodological grounds, seeing
them as missing the point of what it means to be human.

Will Hutton’s 2003 The
World We’re In, recognising the American economy of the day as the unstable
chimaera it was soon proven to be, called on Britain to move away from
neo-liberal economics towards the more stakeholder-focused varieties of
capitalism found in such countries as Germany and the Netherlands. Unlike
shareholder models of capitalism, which hold that a corporation’s sole social
responsibility is to make profits for its shareholders, stakeholder models of
capitalism recognise that a wide range of interest groups have a stake in
corporations, and thus that corporations have duties to a larger society.

Hutton had been pleasantly surprised to see John Paul II, in
his 1991 encyclical Centesimus Annus,
apparently embracing such a view:

“The purpose of a business firm
is not simply to make a profit, but is to be found in its very existence as a
community of persons who in various ways are endeavouring to satisfy their
basic needs and who form a particular group at the service of the whole of
society.”

Addressing a 2008 Vatican conference, Hutton argued that the
modern “knowledge economy” has made such an approach even more important than
when John Paul II first outlined it. Our challenge, he said, is to try to shape
capitalism “so that it does things in its own long-term interests and those of
society”.

Caritas in Veritate
had been partly written in response to such challenges, and it is interesting
that both leaders of Britain’s main political parties appear now to be
channelling aspects of Catholic social teaching, albeit indirectly. The
Anglican Phillip Blond and the Jewish Maurice Glasman have been profoundly
influenced by Catholic social teaching, and it is clear that their ideas are
taken seriously – if not always fully understood – at the higher echelons of
both Conservative and Labour parties.

Reciprocity -- the Missing Ingredient?

A few months back I attended a talk in London by Professor Daniel
Finn, a prominent American scholar of economics and Catholic social thinking.
Having already that day met the Archbishop of Westminster, Finn led a public
discussion of whether markets could be made to operate in a way that would
serve the common good rather than simply generating wealth for a relatively
small number of people.

In exploring how we might assess a market’s morality, Finn
asked us to consider what he called its “moral ecology”, this being a
combination of its regulatory framework, the provision of essential goods and
services, the morality of individuals within organisations, and the presence of
a vibrant civil society.

Focusing on the central issue of morality, Finn quoted Caritas in Veritate:

“The earthly city is promoted not
merely by relationships of rights and duties, but to an even greater and more
fundamental extent by relationships of gratuitousness, mercy and communion.”

Finn observed that although these “relationships of
gratuitousness” are central to our humanity, such reciprocity is almost wholly
absent from economic textbooks, centred as they are upon exchanges and contracts.

Describing how we hold doors open for each other, Finn
explained that reciprocity is a hybrid of contract and gift; we do such favours
in the general expectation that people will either return the favour or perform
similar favours for others. Highly ethical companies, he argued, tend to be
notable for the role played within them by reciprocity. It builds trust,
boosting social capital such that business thrives and everyone gains.

Finn’s idea that the promotion of a culture of reciprocity –
rather than regulation – could hold the key to making markets moral might seem
naïve, but the necessity for such an organic approach was foreseen in 1992 by
Peter Drucker, probably the twentieth century’s most influential management
guru. Identifying a host of problems that would face us now, Drucker said:

“All of these will be central
concerns, especially in the developed world, for years to come. They will not
be solved by pronunciamento or philosophy or legislation. They will be resolved
where they originate: in the individual organisation and in the manager’s
office.”

It may be that making people moral remains our best hope for
making markets moral.

No comments:

I flit between Ireland and England, skulking round churches, libraries, and museums, wetting my throat rather less often than I’d like, but perhaps more often than I should.
I suspect that the secret of life lies in laughter and humility, that only living things can go against the stream, that the riddles of God are more satisfying than the solutions of man, and that placed as sentinels of an unknown watch, we have a duty to whistle.
I think even more than I talk, and on good days I do so in that order.